Newsletter

Egyptian entrepreneurs struggle against culture, lack of capital

Savannah Morning News

Egyptian entrepreneur Dr. Khaled Awad, whose company transmits stock market data directly to mobile phones, poses for a picture in his office in Egypt's new technology campus, known as the Smart Village, near Cairo in Egypt Sunday, March 18, 2007. In Egypt, the creation of small and medium-size companies is considered a key factor for economic growth. (AP Photo/Sebastian Abbot)

Savannah Morning News

Egypt's new technology campus known as the Smart Village, near Cairo in Egypt, is seen Sunday, March 18, 2007. In Egypt, the creation of small and medium-size companies is considered a key factor for economic growth. (AP Photo/Sebastian Abbot)

CAIRO, Egypt - Dr. Khaled Awad is a risk-taker. A doctor by training, he decided at age 26 to give up a secure position in one of Egypt's state-run hospitals to do something considered crazy by most of his countrymen: Start his own business.

Awad, whose company transmits stock market data directly to mobile phones, is so unusual in Egypt that business people and academics are still trying to agree on a common Arabic word for "entrepreneur."

Yet as unemployment remains high across the Mideast, efforts to promote such risk-taking are considered key to boosting countries like Egypt. In a region with corruption-ridden economies and a chronic lack of opportunity for those lacking political connections, there is often a link between economic stagnation and political extremism.

In Egypt, the creation of small and medium-size companies is considered a key factor for economic growth. The country does have a few well-known entrepreneurial success stories, such as Cilantro, a trendy chain of coffee shops, and Otlob.com, a popular home delivery Web site.

But such examples are hard to find. Instead, would-be entrepreneurs continue to face barriers that complicate efforts to turn the germ of an idea into a large and profitable company.

Cultural reluctance

One is the cultural reluctance to cast aside stability for the unknown.

"They assume I am crazy," Awad said of his friends. That's even though he won a national business plan competition sponsored by the Egyptian Entrepreneurs Business Forum that netted him a $9,000 prize and has an office in Smart Village, a new technology office park where giants like Microsoft and Vodafone are located.

Likewise, Nagla Akl, who started a successful marketing agency in Alexandria at age 21, encountered serious resistance from both friends and family.

"I come from a very conservative family," she said, "so they basically hid from the rest of the family I was working on my own for two or three years."

Instead, they said she worked for a magazine because they thought it was too "wild" that she had her own company.

The risk aversion comes, in part, from Egypt's socialist roots. Until recently, every Egyptian who graduated from a university was guaranteed a government job - swelling the country's bureaucracy and setting limits on many peoples' goals.

Regulations key factor

A spate of economic reforms have been put in place in recent years. But many entrepreneurs feel their needs have been neglected, and regulations still bar the way.

Bankruptcy, for example, is still considered criminal in Egypt. In many countries, business failure is accepted as an inevitable byproduct of innovation. But in Egypt, stories of businessmen who go bankrupt run alongside tales of common criminals in newspapers.

A debtor also is deprived of his right to vote, prohibited from working in any commercial profession until he pays back his loans and may also be banned from leaving the country.

Bankruptcy's negative reputation stems from 1990s scandals involving businessmen who got loans from local banks, then fled the country once their plans fizzled.

Because of the past scandals, banks here also remain reluctant to lend to small or medium-size firms - and often require large amounts of collateral that are out of reach.

In a report published in 2004, two international research groups found that small and medium-size firms in Egypt had received only 10 percent of the financing they needed to expand.

The government has implemented reforms in recent years to improve the banking system, but it is unclear if that will increase small lending. As of May 2006, the private sector's share of bank credit was only 3.5 percent, and the overall loan growth rate was declining.

In 2005, two World Bank economists reported that the lack of available financing was the No. 1 factor limiting economic growth here.

Egypt's government set up a Social Fund for Development in 1991 to help new and existing small and medium-size businesses obtain both financing and administrative support.

But many doubt an additional level of government bureaucracy is the answer.

Amr Rezk, an Egyptian who recently graduated from Harvard Business School, is tackling the problem head-on by launching his own group to incubate and finance startups.

"My goal is to create competitive businesses that create a lot of wealth for Egypt - and serve as models for others to follow," he said.